http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.69Change: -0.05
R/$ = 12.32Change: -0.01
Au 1168.78 $/ozChange: -0.02
Pt 1083.00 $/ozChange: 1.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
May 27, 2011

High wage increases put brakes on employment growth

Back
BER senior economist Hugo Pienaar discusses the South African economy. Camera work and editing: Darlene Creamer
China is producing 400 000 new engineers a year while South Africa is living increasingly on imports, says Moeletsi Mbeki, who spoke at the Bureau for Economic Research conference in Johannesburg on Friday May 27. Mbeki, the entrepreneur brother of former South African President Thabo Mbeki, observes that this is enabling the Chinese to build 1 000 km of new trail network a year as well as their own high-speed trains. Camera Work and Video Editing: Darlene Creamer.
previous next
 
 
 
 
 
Africa|PROJECT|Africa|Services|Infrastructure
Africa|PROJECT|Africa|Services|Infrastructure
africa-company|project|africa|services|infrastructure
© Reuse this



South Africa was set for gross domestic product (GDP) growth of above 4% for the next three years, but the growth story did not support the necessary employment expansion, a senior economist said on Friday.

Bureau for Economic Research (BER) economist Hugo Pienaar said that economic growth was mainly driven by an increase in consumer spending, fuelled by excessive wage increases, rather than employment growth.

The New Growth Path aims to create five-million jobs within the next decade, but Pienaar said above-inflation wage hikes would make achieving the target unlikely. “Looking at the early stages of wage negotiations this year, it seems that this trend could continue, which will do nothing for employment growth in the country.”

As a result of high wage increases, South Africa is spending a significant slice of its budget on wages instead of real capital spend.

The South African Institute of International Affairs deputy chairperson Moeletsi Mbeki agreed, saying that private consumer spending contributed 72% to South Africa’s GDP, compared with China, where consumer spending contributed about 35% of GDP.

Pienaar pointed out that owing to structural challenges and skills shortages within government, even the money that was being allocated to capital spending, like the R800-billion allocated to infrastructure spend, was not flowing through to project level.

In addition, he said that the continuing trend of implementing high wage increases was also contributing to rising inflation risks, already fuelled by higher fuel and food prices, which had to some extent been alleviated by the stronger rand.

BER’s forecast for the rand is a somewhat weaker R7,30 to the dollar by the end of 2011, as the US starts to normalise monetary policy. Pienaar expected the unit to weaken more to R7,77 to the dollar by the end of 2012.

Pienaar also said that the South African Reserve Bank (SARB) could start tightening rates as early as September, with a 50 basis points (bps) increase, ahead of an expected November increase.

BER forecasted that this expected September hike would be followed by a further 50 bps increase in November and another 110 bps during the first quarter of 2012. In total, the repo rate is projected to rise by a cumulative 200 bps through 2012.

“This may seem like somewhat of an aggressive outlook, but we believe that this would just take us to a more normalised level as input costs such as wages, electricity and other services costs rise and drive inflation,” said Pienaar.

SARB has left its repo rate unchanged at 5,5% at its three policy meetings this year, after slashing them by 650 basis points between December 2008 and December 2010 to help the struggling economy.

BER expected that the interest rate cycle would peak by the second quarter of 2012.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Economy News
An end to wage negotiations within the local government sector could be in sight as a conciliator’s proposal, setting out a number of settlement suggestions to resolve the deadlock, was expected on Monday. The Independent Municipal and Allied Trade Union (Imatu)...
After becoming the first provincial government to adjudicate its central banking services tender selection process in public on Friday, the Gauteng provincial Government (GPG) now plans to roll-out the “transparent” tender award process across the province to...
JSE-listed black controlled and managed investment company Brimstone expects its earnings per share (EPS) and headline earnings per share (HEPS) for the six months ended June 30 to be negative, owing to the downward fair value adjustments to investments. The prior...
Article contains comments
Article contains comments
More
 
 
Latest News
An end to wage negotiations within the local government sector could be in sight as a conciliator’s proposal, setting out a number of settlement suggestions to resolve the deadlock, was expected on Monday. The Independent Municipal and Allied Trade Union (Imatu)...
Development financier Eastern Cape Development Corporation (ECDC) executive Noludwe Ncokazi on Friday said the organisation had the “huge responsibility of ensuring business continuity”, following the resignation of ECDC subsidiary Automotive Industry Development...
South Africa’s second-largest oil refinery, Engen Refinery (Enref), is set to undergo a three-day planned maintenance outage from July 9 as part of an ongoing maintenance programme to ensure that the facility, which delivers a significant portion of South Africa’s...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
NHLANHLA NENE The main constraints to economic growth are domestic
Finance Minister Nhlanhla Nene earlier this month stated that, while South Africa’s 2015 economic growth target of 2% was achievable, it was not enough to deliver the tax revenue needed to combat the country’s challenges.
The World Steel Association has published the 2015 edition of the World Steel in Figures report, which shows an increase in steel production as well as provides an overview of steel industry activities from crude steel production to apparent steel use.
The 25-year master plan for Gauteng’s Aerotropolis project will go through a process of approval and adoption during June and July, says Aerotroplis project manager Jack van der Merwe. “We are also in the process of putting together a special purpose vehicle (SPV) to...
SOLAR PANELS The existing buildings in the Coega Industrial Development Zone lent themselves well to rooftop solar panel installations
The Coega Development Corporation (CDC) plans to fit 15 of its buildings, totalling 127 000 m2 of roof space, in the Coega Industrial Development Zone (IDZ), in the Eastern Cape, with solar panels.
The Supreme Court of Appeal’s (SCA’s) November 2014 judgment, ordering steel producer ArcelorMittal South Africa (AMSA) to hand over the 2003 Environmental Master Plan for its Vanderbijlpark steel plant to environmental pressure groups, confirmed the right of civil...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96